Services for Corporations and Partnerships
The average sole proprietorship owner pays twice as much as the average S-corporation owner in payroll taxes. Furthermore, the S-corporation owner is able to take payroll taxes as a business expense. With the rising costs of inflation, this is one of the biggest reasons that 18% of sole proprietorships shutter their businesses during their first year. Here at Top Tax Preparation®, we don’t just do taxes. We offer a full range of corporate business management services which include LLC registration, S-corporation registration, and legal business filing so that you can stop overpaying on business taxes and start focusing on your business. Your success is our passion, so click the button below and schedule your FREE consultation so we can discuss how to take your business from startup to success!
Benefits of an S-Corporation
Tax Savings
Credibility
Like the sole proprietorship, S-Corporations are eligible to deduct business expenses as well as the Qualified Business Income Deduction of up to 20%, but S-Corporations are able to classify part of the business earnings as a distribution rather than a salary. This greatly decreases payroll taxes such as Social Security and Medicare. Unlike C-Corporations, S-Corporations aren’t taxed at the corporate level, which means that the typical double taxation that C-Corporations deal with doesn’t apply to the S-Corporation business owner.
Forming an S-Corporation signals to clients, investors, and partners that your business is serious and professional. Not only does this increase confidence for shareholders, but it also builds customer confidence as well. Operating an S-Corporation can create a sense of stability and reliability, which can reassure your customers that your business, products, and services aren’t going anywhere. Not only does this increase customer confidence, but it can also increase sales due to word-of-mouth recommendations.
Flexible Income Options
Easy Ownership Changes
Did you have a really good year, but you don’t want to report that increase as salary? Then the S-Corporation is right for you! The sole proprietorship owner must report every penny of income as salary on their taxes, the shareholders of an S-Corporation are able to decide whether they want to report their increases as salary or distributions. This has a few effects on personal taxes with the most important being savings from payroll taxes.
Whether it be managing shareholders or silent partners, the S-Corportation can easily take on new shareholders, allowing for greater investment opportunities for investors and greater growth for the S-Corporation. Sole proprietorships aren’t able to be owned by more than one entity, so when a sole proprietorship takes on new owners or shareholders, they must decide on a new business entity, and this can result in a lot of legal headaches.
Asset Protection
Perpetual Existence
S-Corporation owners are able to separate their personal and business assets from each other. This means that the liability against shareholders is limited to their investment in the company. This protects shareholders’ assets in the case of bankruptcy. S-Corporations are also to manage risk by purchasing insurance.
The S-Corporation can stay alive for as long as the shareholders want to keep it open. There is no lapse in business whenever a shareholder sells their investment in the company or grants it to another person or entity. Since it’s so easy to change hand of ownership in an S-Corporation, operations don’t need to cease when ownership changes hands.